Why Apple won its legal settlement with the developers

Apple said on Thursday that it had has entered into a legal agreement with the application developers who accused him of abusing his co...


Apple said on Thursday that it had has entered into a legal agreement with the application developers who accused him of abusing his control over the mobile application market.

The settlement of the lawsuit was complex, and various people in the tech industry had very different reactions to it. Apple and the people who sued it have touted the deal as a major concession for Apple and a win for developers. Some of Apple’s critics, including companies that pay it millions of dollars in application fees, have called it a “sham” that hasn’t done much to change control of Apple. on applications.

Here is an explanation of the regulation and what it means.

Courts, regulators, lawmakers and developers have scrutinized Apple’s practice of charging up to 30 percent commission on sales of other companies in its App Store, an activity that some say generates estimates, nearly $ 20 billion one year for Apple.

Many companies that reach their customers through apps don’t want to pay Apple a large amount of money, and they are increasingly fighting to change the rules. Apple claims that his commission rewards him for creating the “economic miracle” of the App Store, and he is fighting to maintain the status quo.

Billions of dollars are at stake in one of Big Tech’s biggest battles for power.

Not a lot. It agreed to keep its commission rates stable for three years and to continue to base search results in its App Store on “objective characteristics” such as downloads and user ratings, also for three years.

On a granular level, he said, this will allow developers to sell their apps at 500 different prices, up from 100. (For example, an app can now charge $ 32.99 instead of $ 29.99 for one. subscription.)

And he agreed to create a $ 100 million fund for developers of small apps. (More on that later.)

But what is catching the most attention is a “clarification” of Apple’s rules: companies can now email customers to let them know how to pay other than in their iPhone (or iPad) app. ).

Apple says so. But that appears to be a minor change to a set of rules that are at the center of complaints about how Apple controls its App Store.

Apple forces businesses to use its payment system in their iPhone apps, which allows it to earn its commission on their sales. Most companies would prefer to direct customers elsewhere to transact in order to avoid Apple’s fees. But Apple also generally prohibits companies from telling customers to pay elsewhere.

Apple has long forbidden such a direction. It also banned businesses from even using emails to tell customers about other ways to pay if businesses got customers’ email addresses from their iPhone app.

Now Apple says it’s okay for businesses to send such emails, if businesses get the customer’s permission to do so.

Some companies appear to have already partially violated Apple’s rules. To avoid Apple’s commission, the music service Spotify, for example, doesn’t allow people to purchase a subscription in its iPhone app. Yet after someone creates a free account in the app, Spotify emails a link to their website, where they advertise their paid accounts, though the email doesn’t explicitly tell users bypass Apple’s commission.

An Apple spokesperson said that companies, including Spotify, had complained for years about Apple’s restrictions on sending emails to certain customers.

There has been tentative praise from some lawmakers who have proposed legislation to change the rules of the App Store. Senator Richard Blumenthal, a Democrat from Connecticut, said on Twitter that the regulations “mark an important step forward, but fail to rectify the full and blatant array of abuses and market practices still prevalent in app markets. “.

The biggest praise came from the App Association, an organization that claims to “give small tech companies a voice” but is funded by large tech companies, including Apple. “Our members need Apple to continue to be the leader in privacy, security and safety in order to preserve the trust consumers have in platforms,” the group said.

Many companies that pay Apple’s commission weren’t so kind. The Coalition for App Fairness, a group of companies fighting against Apple’s rules, said the regulation “does nothing to address the structural and fundamental issues facing all developers, large and small, compromising innovation. and competition in the application ecosystem “. The group added that Apple’s restrictions on what companies can say in private communications with their customers illustrated Apple’s inappropriate control over the app market.

David Heinemeier Hansson, an entrepreneur and app developer who openly criticizes Apple’s rules, said in a message on Friday that opening a narrow lane for businesses to direct customers to other payment options only gives Apple a cover to defend its ban on such communication in places that matter, like the transaction page in an app. .

“If the developer community had had any hope for this class action lawsuit, this result would have been a dagger in the heart. Much worse than if no prosecution had been initiated, ”he wrote. “If anything, this regulation cements the enormous power that Apple has and wields. Even when a class action lawsuit is underway, it can be bought with bromides and bribes.

There was a lot of confusion after the settlement was announced in part because of the way Apple announced it. The company told reporters about an evening press briefing two hours before it started, and then was released. a draft press release just as the briefing began.

This meant that while an Apple executive described the settlement as a victory for developers, reporters were already rushing to tweet and file first drafts of articles. Incentives for digital news today reward those who are first, not those who are more nuanced or specific. (An Apple public relations official asked reporters not to name or quote the executive in order to hear the briefing.)

As a result, news headlines initially featured the change as a major way for companies to avoid Apple’s commission. This was good for Apple, as any perception that it was making substantial changes to its App Store rules could help appease developers, courts, regulators, and lawmakers.

In fact, it seems Apple has paid a small price to get rid of a potentially significant legal headache.

Apple is still awaiting a federal judge’s ruling in a separate lawsuit filed by Epic Games, the maker of the popular game Fortnite. Epic wants to force Apple to allow app developers to avoid App Store commissions altogether.

Thursday’s settlement requires the approval of Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California. She is also the arbitrator in the Epic Games case.

Apple is probably hoping its rule change could help persuade Judge Rogers that it addresses developers’ concerns in a meaningful way. She said in May that she hoped to make a decision this month.

Apple is paying $ 100 million in the settlement. The company said it was not a legal reward but rather “a fund to help small American developers, especially as the world continues to suffer from the effects of Covid-19.”

The developers are expected to get $ 70 million in money. App makers who earned less than $ 1 million per year in the App Store from June 2015 to April 2021 are eligible for payouts between $ 250 and $ 30,000 each.

Lawyers for the plaintiffs are asking for the remaining $ 30 million.

Steve Berman, one of the attorneys, said in an email that attorneys typically get 25% of those settlements, with more money possible if they guarantee other benefits for their clients. “Due to the multitude of business changes that will help developers, we believe an upward adjustment is deserved,” he said.

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